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TMI Blog2023 (11) TMI 751X X X X Extracts X X X X X X X X Extracts X X X X ..... s 92CA(3)/80- lA(8)/80IC would lead to reduction in profit for the current year and increase in carried forward of loss for the purpose of deduction u/s 80IC. TPO thereafter has proposed an adjustment and which has been upheld by the DRP. The effect of such an adjustment would therefore be reduction in profits of the Unit V for the current year and increase in its carried forward losses by equivalent amount. Further, given that there are past accumulated losses and no profits available for the year after such setoff, there is no claim which has been made by the assessee u/s 80IC in the return of income prior to such adjustment. Even post such adjustment, no profits will become available which has been considered by the AO for allowing deduction u/s 80IC - Thus, the adjustment so made by the TPO and upheld by the DRP cannot lead to enhancement by way of addition to the returned income as has been done by the AO while passing the final assessment order. The adjustment will lead to increase in carry forward of losses to the subsequent years. In light of aforesaid discussions, we agree with the contention advanced by the ld AR in this regard and the addition is hereby directed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pective units though the said units were eligible for deduction under section 80IC of the Act. It was accordingly submitted that the transfer pricing adjustment so made by the TPO and upheld by the DRP therefore cannot be made a basis for making the addition to the returned income of the assessee as there was no claim under section 80IC at first place. 4.1 In this regard, it was submitted that the assessee company is a private limited company engaged in the business of manufacturing and dealing in automotive parts like gears, axles and shafts etc. having its office and works at Parwanoo, Kalka, Barotiwala and Rajgarh. For the year under consideration, the assessee company filed its return of income declaring total income at Rs. 4,62,20,060/- after claiming deduction under section Chapter VI-A amounting to Rs. 1,83,750/- only on account of donation and not in respect of deduction under section 80IC of the Act. 4.2 It was submitted that the case of the assessee was referred to the TPO as the case was selected for scrutiny and one of the reason being the TP Risk Parameter. Thereafter the TPO passed the order under section 92CA(3) of the Act on 25/01/2021 wherein the relevant fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-Il for which no comparable are available. The assessee. has purely on estimate basis considered 35% to 38% of the product price as the appropriate value for the work done by Unit-V. There is no basis what so ever for this estimate. The assessee has failed to provide any uncontrolled comparable case. It was noted by the Ld. TPO in the case of assessee that the assessee has not done any benchmarking for Unit V The profits of the assessee at enterprise level are available which are not affected by any inter-company transactions. The details of inter unit transactions are on record. Considering these facts the Ld. TPO applied profit split method by dividing profits in the ratio of contribution made by each unit in the form of cost incurred by them. On the basis of information available, profit split method applied by the Ld. TPO is the appropriate method. The assessee has argued that no deduction u/s 80IC was claimed and no further adjustment is required in the computation of total income. For claim of deduction u/s 80-IC of the Income Tax Act, the assessee is required to fulfill certain conditions. Claim or no claim of deduction u/s 80-IC is irrelevant for benchmarking of inter-unit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2021 which is reproduced as under:- The assessee has finally claimed that it has not claimed deduction u/s 80IC for any unit for assessment year 2017-18. However, since Unit V is eligible for deduction u/s 80IC as per claim of the assessee, its inter-unit transactions have to be benchmarked as per section 92CA read with section 80-IA(8)/80IC of the Income Tax Act, 1961. Further, it is noticed that the assessee has declared profit of Rs. 8,45,95,489/- for Unit V which has been adjusted by brought forwarded earlier years' loss of Rs. 10,65,85,348/- and carried forward loss of Rs. 2,19,89,859/- as per the information filed. Any downward adjustment made in the present order u/s 92CA(3)/80-lA(8)/80IC would lead to reduction in profit for the current year and increase in earned forward of loss for the purpose of deduction u/s 80IC. So, the necessary benchmarking, as mandated by section 92CA has to be done in the case whether the assessee has claimed deduction u/s 8IC for the present year or not. 7. The assessee has also filed appeal before the DRP-1, New Delhi regarding proposed addition of Rs. 5,63,07,963/- on the recommendation of the Ld. TPO. As reproduced in para 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, the TPO has noticed that the assessee has declared profit of Rs. 8,45,95,489/- for Unit V which has been adjusted by brought forwarded earlier years' losses of Rs. 10,65,85,348/- and carried forward loss of Rs. 2,19,89,859/- as per the information filed and any downward adjustment made in the present order u/s 92CA(3)/80- lA(8)/80IC would lead to reduction in profit for the current year and increase in carried forward of loss for the purpose of deduction u/s 80IC. The TPO thereafter has proposed an adjustment of Rs 5,63,07,943/- and which has been upheld by the DRP. The effect of such an adjustment would therefore be reduction in profits of the Unit V for the current year by Rs 5,63,07,943/- and increase in its carried forward losses by equivalent amount. Further, given that there are past accumulated losses and no profits available for the year after such setoff, there is no claim which has been made by the assessee u/s 80IC in the return of income prior to such adjustment. Even post such adjustment, no profits will become available which has been considered by the AO for allowing deduction u/s 80IC of the Act. Thus, the adjustment so made by the TPO and upheld by the DRP ..... X X X X Extracts X X X X X X X X Extracts X X X X
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